Senator Feinstein Seeks Major Grant Assistance for Stockton, Other California Communities Hit Hard by Foreclosure Crisis

Washington, DC – September 16, 2008 – (RealEstateRama) — U.S. Senator Dianne Feinstein (D-Calif.) is urging the U.S. Department of Housing and Urban Development to ensure that Stockton and other California cities and counties hit hard by foreclosures receive substantial financial assistance to combat blight.

Under the Housing and Economic Recovery Act passed in July, $3.9 billion in Community Development Block Grant (CDBG) money will be made available to hard-hit communities to buy and rehabilitate foreclosed and abandoned properties.

In a letter to Steve Preston, Secretary of the Department of Housing and Urban Development, Senator Feinstein noted that six of the 10 U.S. metropolitan areas hit hardest by the foreclosure crisis are in California.

Senator Feinstein’s letter also noted that Stockton has had the highest foreclosure rate in the nation, with 19,531 homes going into foreclosure there this year. Other California communities hit hard by the crisis include: Riverside-San Bernardino; Bakersfield; Sacramento; Los Angeles; and Long Beach.

Following is the text of Senator Feinstein’s letter:

September 8, 2008

The Honorable Steve Preston
Secretary
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, D.C. 20410

Dear Secretary Preston:

As you develop the distribution formula for the $3.9 billion in Community Development Block Grants (CDBG) under the Housing and Economic Recovery Act of 2008, I urge you to provide a generous allocation to localities in California that have been hit hard by the foreclosure crisis.

These CDBG funds are critical for California communities to redevelop foreclosed and abandoned properties, and to combat blight in neighborhoods.  Last year, nearly a half million homes in California went through foreclosure (481,391) – triple the number of the year before (142,429).  Homes lost to foreclosure in my state hit a 20-year high in the second quarter of 2008, and the situation is likely to worsen.

California has the second highest foreclosure rate in the nation, with one in every 65 properties in foreclosure – about three times the national average (one out of every 171 homes in foreclosure).  Moreover, six of the ten metropolitan areas with the highest foreclosure rates in the nation are in California.  CDBG funds are urgently needed in many California communities where foreclosure rates are among the highest nationwide.  For example:

• Stockton: one out of every 25 homes in foreclosure in the second quarter of 2008, seven times the national average;
• Riverside & San Bernardino: one out of every 32 homes in foreclosure;
• Bakersfield: one out of every 41 homes in foreclosure;
• Sacramento: one out of every 49 homes in foreclosure; and,
• Los Angeles & Long Beach: one out of every 91 homes in foreclosure.

Many of these communities are experiencing deteriorating conditions and diminishing home values as a result of the high number of foreclosures.  I would specifically like to call your attention to the City of Stockton, which has been referred to as “America’s foreclosure capital.”

This vibrant city of more than 260,000 residents has been devastated by foreclosures.  And, the damage is not confined to only those with subprime mortgages.  Property values have plummeted, making it difficult for all residents with adjustable rate mortgages to refinance.  Foreclosures have had a ripple effect on the local economy, and the downturn in the construction industry has contributed to an unemployment rate of 10.6 percent in San Joaquin County (nearly twice the national average).

The City of Stockton is in a special category of need.  I would like to ask you and your staff to consider initiating a pilot program at HUD whereby a sufficient amount of CDBG funds are set-aside separately to help renovate foreclosed homes in such communities for purchase by teachers, fire fighters and police.  Targeting additional resources to provide affordable housing for those in critical professions will help to rebuild these areas.  Stockton would be a great place to begin, and I would very much like to work with you on this proposal.

Thank you very much for your consideration of this important matter.  Please know that I stand willing to help in any way that I can.

Sincerely,

Dianne Feinstein
United States Senator

P.S.  Attached please find a map of Stockton which highlights properties that have been lost to foreclosure.  I have also included data regarding the most active lenders in the Stockton subprime mortgage market and pictures taken by my staff which demonstrate how bad the situation has become.  We must act to help residents of this community.